The Norris Group Hard Money shares the latest headlines in the investing, Realtor, lender, builder, and mortgage industries every weekday. We then collect the news and share the top headlines via our videos every Friday.

Tuesday, September 30, 2008

"The U.S. may face its longest recession in a quarter century no matter what action Congress takes on Treasury Secretary Henry Paulson's $700 billion plan to rescue the battered banking industry. Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said it now appears the economy shrank in the third quarter as credit- crimped consumers cut spending for the first time since 1991. A further contraction is likely in the next two quarters, some economists predicted, which would make the recession the longest since 1981-82."

"Wachovia Corp. Chief Executive Officer Robert Steel was forced to sell the bank's consumer business to Citigroup Inc. for $1 a share just 80 days after pledging to win back shareholders' confidence. Time ran out after last week's forced sale of Washington Mutual Inc., the biggest savings and loan, to JPMorgan Chase & Co. amid losses tied to option adjustable-rate mortgages. WaMu's collapse heightened concern about the $122 billion of option ARMs sold by Wachovia, the No. 1 provider of such loans, according to Sean Ryan, an analyst at Sterne Agee & Leach Inc. in New York."

"Citigroup Inc.'s rescue of Wachovia Corp. and its banking operations creates the third-biggest U.S. branch network while aiding regulators seeking to prop up confidence in financial institutions. The purchase gives Citigroup about 4,300 U.S. offices and 3,300 worldwide. The bank will cut its dividend in half, to 16 cents from 32 cents, and raise $10 billion. The stock deal, announced before rejection of a bank bailout sent U.S. shares tumbling the most in 20 years, values Wachovia at $1 a share."

"President George W. Bush and Senate leaders vowed today to revive a $700 billion financial rescue plan amid evidence voters and lawmakers regretted yesterday's U.S. House vote to kill the bailout. Senate Republican leader Mitch McConnell of Kentucky predicted lawmakers would wrap up work on the plan by the end of this week. A plunge in U.S. markets, partially erased today, makes it clear Congress must act, he said."

"A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing. The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history."

"when the dust was settled after Monday’s stock-killing, busted bailout vote, the S&P 500 — that venerable marker of U.S. stocks — had taken its worst tumble in 21 years. That 8% one-day fall left the S&P 500 index 29% below the all-time high set last October."

"A bill that would have given California tenants additional protections when the home they are renting gets foreclosed has been vetoed by Gov. Arnold Schwarzenegger. Under existing law, only the original property owner is responsible for rent deposits. If that landlord gets foreclosured by a bank, tenants now have little recourse in recovering a deposit."

"the average buyer probably doesn't have the cash to gamble on real estate--and shouldn't, at least for now. Income growth has stalled for the vast majority of Americans for the past eight years, and home equity has been vanishing rapidly since the peak of the boom in 2005. (Last month, median existing home prices nationwide fell 6%, to $221,900.) The roiling stock market is hardly a comfort either, as everyone who has peeked at a 401k statement over the past week knows."

Monday, September 29, 2008

"The National Association of Realtors® is extremely disappointed in the actions of the U.S. House of Representatives today in failing to pass the Emergency Economic Stability Act of 2008. This legislation is critical to stopping the economic turmoil that millions of Americans are facing. Completing a recovery plan that will end the current economic crisis crippling the housing and financial markets must be accomplished quickly and in a bipartisan manner."

"The U.S. Treasury Department's effort to back up money- market investors announced Sept. 19 seems to be working in stopping withdrawals from the $3.35 trillion industry. Assets have grown by about $23 billion through Sept. 24."

"A brochure pitching $1.84 million of notes sold by Lehman Brothers Holdings Inc. in August, a month before the firm filed for bankruptcy, promised '100 percent principal protection.'Buyers had 'uncapped appreciation potential' pegged to gains in the Standard & Poor's 500 Index, the brochure said. In the worst case, they would get back their $1,000-per-note investment in three years. Only the last in a list of 15 risk factors mentioned the biggest danger: 'An investment in the notes will be subject to the credit risk of Lehman Brothers.'"

"As much as $37 billion from federal bailout loans to American International Group Inc. has gone to investment banks including Goldman Sachs Group Inc., the firm Treasury Secretary Henry Paulson used to run. Without the government money, Goldman, Merrill Lynch & Co., Morgan Stanley, Deutsche Bank AG and other firms could have become some of the biggest creditors in a bankruptcy filing by AIG, the world's largest insurer, because of its billions in losses on subprime bonds and corporate debt."

"Citigroup Inc., the biggest U.S. bank by assets, will acquire banking operations of Wachovia Corp. for about $2.16 billion after shares of the North Carolina lender collapsed under the weight of overdue mortgages. The all-stock deal equals about $1 a share for the Charlotte-based bank, ranked sixth by assets in the U.S. All depositors will be protected, according to the Federal Deposit Insurance Corp., which helped broker the takeover by Citigroup. The New York-based bank plans to cut its own dividend in half and raise $10 billion in capital as it takes on Wachovia's senior and subordinated debt."

"Morgan Stanley agreed to sell a 21 percent stake to Japan's Mitsubishi UFJ Financial Group Inc. for $9 billion, seeking to shore up investor confidence after borrowing costs climbed and its stock fell by half. Mitsubishi UFJ, Japan's biggest lender, will buy $3 billion of common stock and $6 billion of convertible preferred stock that pays a 10 percent dividend, the two companies said today in a statement. Morgan Stanley shares fell 15 percent amid a collapse in bank stocks after a $700 billion financial-rescue bill failed to pass in Congress today and Wachovia Corp. sold most of its assets to Citigroup Inc."

"Patriot Homes Inc., the 36-year-old builder of manufactured homes, sought bankruptcy court protection from creditors along with seven affiliates, blaming the collapse of the U.S. real-estate market. Patriot, based in Middlebury, Indiana, has nearly 500 workers at three production sites in Indiana, Texas and Alabama, according to court papers. The company said it's one of the largest privately owned U.S. builders of modular homes."

"Construction Industry Research Board figures out this month show that permits for new home construction dropped 94% in Orange County last month. The board reported that 74 building permits for new homes were issued here in August, compared to 1,302 the same month last year. August’s building permit number is just one-tenth the average number for an August in the past 20 years."

Friday, September 26, 2008

"The Bush administration and Congress anxiously revived negotiations on a $700 billion financial bailout on Friday, one day after the largest bank collapse in U.S. history provided a brutal reminder of the risks of failure."

"Deborah Horn tugs on the handle of the glass-paned entrance of the IndyMac Bancorp Inc. branch in Manhattan Beach, California. The door won't budge. The weekend is approaching, and Horn, 44, the sole breadwinner in a family of three, needs cash. A small notice taped to the window on this Friday afternoon in mid-July tells her why she's been locked out. IndyMac has failed, the single-spaced, letter-sized paper says; the bank is now in the hands of the Federal Deposit Insurance Corp."

"Democrats and Republicans in Congress are demanding that limits be placed on executive pay as part of the $700 billion financial rescue plan proposed by U.S. Treasury Secretary Henry Paulson. The former Goldman Sachs Group Inc. CEO, who received about $111 million between 2003 and 2006, said in testimony to Congress on Sept. 24 that he would accept such limits as part of the plan, after initially opposing them."

"KB Home, one of the nation's largest home builders, said Friday its third-quarter loss quadrupled from the year-ago period, missing Wall Street's expectations as revenue plunged by 56 percent amid falling sales and home prices."

"Barclays PLC agreed to assume Lehman Brothers Holdings Inc.'s lease at the bankrupt investment bank's Times Square headquarters for $960 million, New York City records show. The third-biggest U.K. bank, which agreed on Sept. 16 to buy Lehman's North American investment banking and some trading and research operations, agreed to take over payments the bankrupt firm was making to Rockefeller Group Inc. which owns the land underneath 745 Seventh Ave. Lehman owned the 32-story, 1.05 million square-foot tower."

"Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.09 percent with an average 0.7 point for the week ending September 25, 2008, up from last week when it averaged 5.78 percent. Last year at this time, the 30-year FRM averaged 6.42 percent."

"Looking for a new home can be exciting and frustrating. You can help alleviate the frustration by paying close attention to five key areas of the homes you're considering buying; it may save you money in the long run."

Thursday, September 25, 2008

"The nation’s home builders today called on Congress to move promptly to enact the emergency financial rescue plan proposed by Treasury Secretary Henry Paulson that is designed to stabilize worldwide financial markets and restore consumer and investor confidence in the U.S. economy.During its board of directors meeting in San Diego, the leadership of the National Association of Home Builders (NAHB) unanimously called on Congress to act now before conditions deteriorate to a point that could trigger a global financial meltdown."

"Existing-home sales were down in August following a healthy gain in July as tight mortgage credit curtailed activity, according to the National Association of Realtors®. Sales rose in the Midwest and South but fell in the Northeast and West. Nationally, existing-home sales – including single-family, townhomes, condominiums and co-ops –declined 2.2 percent to a seasonally adjusted annual rate1 of 4.91 million units in August from an upwardly revised pace of 5.02 million in July, but are 10.7 percent below the 5.50 million-unit pace in August 2007."

"According to statistics compiled by the Construction Industry Research Board, 4,484 permits were pulled throughout California, down 61 percent when compared to the same month a year ago and down 21 percent from July. Single-family permits totaled 2,241, down 58 percent from August 2007 and down 28 percent from July, while multifamily permits totaled 2,243, down 63 percent when compared to August 2007 and down 13 percent from the previous month."

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 19, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 591.4, a decrease of 10.6 percent on a seasonally adjusted basis from 661.7 one week earlier. On an unadjusted basis, the Index decreased 11.1 percent compared with the previous week and was down 9.3 percent compared with the same week one year earlier"

"Congressional leaders are weighing new ways to revise a $700 billion Wall Street rescue plan after it became clear that U.S. Treasury Secretary Henry Paulson's proposal faces resistance from both Democrats and Republicans. House and Senate Democratic leaders huddled late yesterday to consider new strategies, including the possibility of approving only a $150 billion initial installment for the government to purchase troubled assets from financial firms. Senator Charles Schumer of New York, the No. 3 Senate Democratic leader, said Paulson wouldn't have time to use the full $700 billion before the Bush administration left office on Jan. 20."

"Federal Reserve Chairman Ben S. Bernanke said the U.S. is facing 'grave threats' to financial stability and warned that the credit crisis has started to damage household and business spending. 'Economic activity appears to have decelerated broadly,' Bernanke said today to a congressional Joint Economic Committee hearing, downgrading the assessment of Fed officials when they met on Sept. 16."

"Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation."

Tuesday, September 23, 2008

"The level of commercial/multifamily mortgage debt outstanding grew by 1.5 percent in the second quarter, to $3.44 trillion, according to the Mortgage Bankers Association's (MBA) analysis of the Federal Reserve Board Flow of Funds data."

"Home prices in July fell 5.3 percent compared with a year ago, a government agency said today, and have now receded to October 2005 levels. The home price index was down 0.6 percent from June on a seasonally adjusted basis, according to the Federal Housing Finance Agency. "

"Federal Reserve Chairman Ben S. Bernanke signaled that the government should buy devalued assets at above-market values to make its proposed $700 billion rescue package most effective in combating the financial crisis. "

"Morgan Stanley and Goldman Sachs Group Inc., the two largest remaining independent U.S. securities firms, may add to the $81 billion of financial services deals unveiled during the past week as they morph into banks."

"Barclays Plc, the U.K. bank that bought parts of Lehman Brothers Holdings Inc.'s U.S. businesses, may cut as many as 5,000 jobs at the bankrupt company, Wall Street recruiters said. The estimate, based on the $2.5 billion Barclays set aside for potential severance and retention costs, would mean half the Lehman employees transferred to the London-based company may be let go. Barclays, which agreed to pay $1.7 billion for the business, said it will decide in three months who will be offered permanent positions."

"GMAC LLC, the money-losing home and auto lender, will sell its home-services unit to Brookfield Asset Management Inc. as it expands efforts to raise cash. The transaction, which will stretch Brookfield's Residential Property Services unit into the U.S., will likely be completed in the fourth quarter of 2008, Toronto-based Brookfield said today in a statement. Terms of the deal aren't being disclosed, said GMAC spokeswoman Gina Proia and Brookfield spokesman Rob Ireland."

"American International Group Inc., selling assets to repay a U.S. government loan, may seek buyers for some of its $16 billion in global real estate holdings. The largest U.S. insurer, which agreed last week to an $85 billion federal loan to stay afloat, may find eager buyers for property it owns in more than 30 countries and 14 U.S. cities. In Manhattan alone, it controls three office buildings with 2 million square feet."

"Resurrecting bankruptcy cram down during this current crisis would be wholly unproductive and, in fact, runs counter to the bi-partisan efforts to restore liquidity to the global capital markets. In fact, it is really irrelevant to the current discussion. Once the fund purchases the distressed mortgages, it doesn’t need a bankruptcy judge to rewrite the loan balance. It can write down the loan balance itself, without Congress giving bankruptcy judges that authority."

"Price, though, is still the primary measure of affordability for any buyer. And while the median price for an existing house has tumbled 8% from $230,100 to $212,400 since its peak in 2006, according to the National Association of Realtors, many potential buyers still see asking prices as expensive."

"Investment bank Morgan Stanley said Monday it signed a letter of intent to sell up to 20 percent of the company to Mitsubishi UFJ Financial Group Inc. Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley's book value after Japan's largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding."

"$700 billion doesn’t include the several hundred billion dollars spent to bail out AIG, Freddie Mac, Fannie Mae and Bear Stearns. Add in the shoring up of Money Market Funds, the tax stimulus effort earlier this year and other programs to rescue homeowners, and we’re talking well over $1.5 trillion."

Friday, September 19, 2008

"An estimated 37,988 new and resale houses and condos were sold statewide last month. That was down 3.8 percent from 39,507 in July and up 13.6 percent from 33,429 for August last year. California sales for the month of August have varied from 29,764 in 1992 to 73,285 in 2005, the average is 49,927. MDA DataQuick's statistics go back to 1988."

"One symptom of these times: a surge in the number of million-dollar foreclosures. According to RealtyTrac, the number of homes valued at more than $1 million that are in some stage of foreclosure has swelled to 7,968 between January and August. That compares with 4,214 during the same period last year."

"The nine-county region saw a total of 7,232 new and resale houses and condos sold last month, down 4.7 percent from 7,586 in July but just 0.9 percent lower than the 7,299 sales a year ago. An 'average' August sees just over 10,000 sales."

"As the U.S. government takes stronger measures to stabilize financial markets, some former Federal Reserve officials, lawmakers and Wall Street executives are saying too much has already been done. 'Every time they intervene, they do more harm than good,' said Peter Schiff, president of Euro Pacific Capital in Darien, Connecticut, a brokerage that manages $1 billion."

"The market storm that brought down Lehman Brothers Holdings Inc., American International Group Inc. and other pillars of U.S. finance may have also blown holes in the portfolios of House Speaker Nancy Pelosi, Senator John Kerry and more than 50 other members of Congress.Pelosi, in her most recent financial disclosure form, reported that her husband owned between $250,000 and $500,000 of stock in AIG, which ceded majority control to the U.S. government this week in exchange for $85 billion of loans."

"The Federal Reserve and Treasury's efforts to solve the financial crisis may have only undercut the ability of banks and Wall Street firms to raise new equity capital, leaving them to fail or be taken over. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson are now working with Congress on what Paulson described as a more 'comprehensive approach,' after finding that case- by-case bailouts only produce runs on more firms. The new plan will help banks get rid of 'illiquid assets' on their books, he said after meeting legislators late yesterday."

"Morgan Stanley and Goldman Sachs Group Inc., the two biggest independent securities firms in the U.S., led financial shares higher after the government said it would take troubled assets off finance companies' balance sheets."

"The U.S. Securities and Exchange Commission took what it called 'emergency action' on Friday and temporarily banned investors from short-selling 799 financial companies. The temporary ban, aimed at helping restore falling stock prices that have shattered confidence in the financial markets, takes effect immediately."

Wednesday, September 17, 2008

"A total of 7,232 new and resale houses and condos were sold in the nine-county Bay Area in August. That was down 4.7 percent from 7,586 in July, and down 0.9 percent from 7,299 in August 2007, according to San Diego-based MDA DataQuick."

"The years of easy money were fun while they lasted. Banks and credit card providers were so flush with cash that they could help virtually anyone — including many who had trouble juggling their bills — pay for whatever they wanted."

"nation's financial system is in the midst of a massive shakeup and many on Wall Street and in Washington are pointing fingers and looking for someone to blame. But in the end, it all comes back to one issue - housing. Earlier this decade, it was much easier to get a mortgage. Home prices soared about 85% from 1996 through 2006 in inflation-adjusted dollars, creating a bubble. Then the bubble popped. And the fallout isn't over yet, experts say."

"rapid-fire rescues of financial firms may end up tarnishing America's free-market reputation as the moves expose defects in the U.S. economy, undermining its standing with foreign buyers of the dollar and U.S. Treasury securities. The government's actions might add hundreds of billions to a budget deficit already expected to hit a record next year. The salvage operations, which include Tuesday's takeover of American International Group Inc., also raise questions about the U.S. commitment to a free-market economy that, until recently, was the envy of the world."

"One of life's rules is that there's bad in good and good in bad. The total collapse of the U.S. financial system is no exception. Even in the midst of the current financial despair we can look around and identify many collateral benefits. A lot of attractive office space seems to be opening up in midtown Manhattan, for instance, and the U.S. government is now getting paid to borrow money. (And with T-bills yielding 0 percent, they really ought to borrow a lot more of it, and quickly.)"

"AIG will probably sell assets to raise cash and repay the $85 billion loan it secured Sept. 16 from the Federal Reserve to stay in business. The insurance units are solvent, regulators said, because New York-based AIG was barred from tapping reserves at the subsidiaries even as $18 billion of losses tied to home loans drained capital from the holding company."

"The world's major central banks banded together on Thursday to inject as much as $180 billion into money markets in a bid to stave off the growing global financial crisis. The Federal Reserve joined with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank to pump more short-term dollar liquidity into the financial system."

"Construction of new homes and apartments fell to the weakest pace in 17 years in August, far more than expected, but lower mortgage rates and tax credits have given builders some glimmer of hope of a possible rebound."

"About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California. Today's daily rate more than doubled, with smaller gains in the one-week and one-month rates, as lenders demanded higher compensation for risk after Lehman Brothers Holdings Inc. collapsed and the value of American International Group Inc. fell 84 percent in a week."

"Nationwide housing starts declined 6.2 percent in August as home builders continued to cut back on new construction in order to scale back their inventories and help pave the way for housing market recovery, according to figures released by the U.S. Commerce Department today."

"Lawrence Yun, NAR chief economist, said problems on Wall Street are affecting commercial real estate. 'Although capital remains available for residential loans, the credit crunch is pronounced in commercial lending,' he said. 'Combined with a slowing economy, the lack of credit is curtailing activity in the commercial real estate sectors. As a result, there’s been a slowdown in the net absorption of space, which is leading to higher vacancies and more modest rent growth.'"

"Construction of new homes and apartments fell to its lowest level in 17 years last month, showing the country is still gripped by a severe housing downturn that has triggered billions of dollars of losses and is reshaping the structure of U.S. finance. The Commerce Department reported Wednesday that housing construction dropped a surprise 6.2% last month to a seasonally adjusted annual rate of 895,000 units. That's the slowest building pace since January 1991, another period when housing was going through a painful correction."

"The median price paid for all new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties was $330,000 last month, down 5.2 percent from $348,000 in July and down a record 34 percent from $500,000 in August 2007, according to San Diego-based MDA DataQuick."

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 12, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 661.7, an increase of 33.4 percent on a seasonally adjusted basis from 496.2 one week earlier. On an unadjusted basis, the Index increased 65.3 percent compared with the previous holiday-shortened week and was down 1.3 percent compared with the same week one year earlier."

Tuesday, September 16, 2008

"Builder confidence in the market for newly built single-family homes rose for the first time in seven months this September, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI gained two points to 18, rising from its record low of the previous two months."

"A Department of Housing and Urban Development (HUD) proposal relating to the Real Estate Settlement Procedures Act of 1974 (RESPA) “would result in significant increases in home purchase costs and undermine critical financing support at a time of severe mortgage and housing market turbulence,” according to the nation’s home builders."

"U.S. mortgage rates are dropping. Good luck getting a loan. Existing home prices have fallen 7.7 percent since their July 2006 high and rates dropped below 6 percent last week for the first time in more than three months. The obstacle for people ready to buy is finding a willing lender, said Suzanne Bach, senior vice president of New York-based Guardhill Financial Corp., and an 18-year home lending veteran."

"About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California. Today's daily rate more than doubled, with smaller gains in the one-week and one-month rates, as lenders demanded higher compensation for risk after Lehman Brothers Holdings Inc. collapsed and the value of American International Group Inc. fell 84 percent in a week."

"Washington Mutual Inc., the biggest U.S. savings and loan, rose in New York after the company said it doesn't expect a 'material' effect from Standard & Poor's decision to cut the lender's credit rating to junk. WaMu rose 47 cents, or 24 percent, to $2.47 at 10:49 a.m. in New York Stock Exchange composite trading. The stock slumped 27 percent yesterday and had lost half its value since Sept. 8."

"Impac Mortgage on Monday finally got around to releasing its earnings for the first half of the year, reporting a loss of $31 million, down from $274 million a year earlier. The Newport Beach-based company, the last of O.C.’s sizable mortgage companies (those that make or own home loans but don’t take consumer deposits) still standing, said it’s looking to raise money for 'strategic initiatives, which may include strategic acquisitions.'"

"Rent increases in the Orange County-Los Angeles-Riverside area dropped below 5% in March, and have stayed in the 4% range ever since, reports the Bureau of Labor Statistics. The last time rents hikes were under 5% that long was in the seven months from September ‘02 to March ‘03, but the lowest they got in that stretch was 4.7%."

"Shares of PCM Fund, a bond fund specializing in loans made on commercial properties run by Pimco in Newport Beach, plunged in recent days to all-time lows. This AM, as investors around the global fled many assets viewed as risky, PCM traded as low at $7.41, or 14% below Monday’s closing price of $8.59. That price was the lowest close since PCM started in 1993."

Monday, September 15, 2008

"The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new home sales in July were 57 percent below July 2007. The decline was similar to the 58 percent year-over-year drop seen the month prior, and is a testament to the ongoing weakness in California housing market conditions. During July, 2,348 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 5,437 in July 2007. During the current period, sales of single family homes were off by 54 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 50 percent and sales of condominiums were down by nearly 67 percent."

"Briefing reporters at the White House, Paulson said he 'never once' considered it would be appropriate to put taxpayer money at risk to resolve the problems at Lehman Brothers. The nation's fourth largest investment bank filed for bankruptcy protection earlier Monday."

"Wachovia Corp. shares plummeted Monday amid intensified concerns on Wall Street about big banks' exposure to bad mortgage loans. Shares of the fourth-largest U.S. bank, already down more than 70 percent from a year ago, tumbled another $3.56, or 25 percent, to $10.71."

"Americans are justified to be worried, says Nouriel Roubini, of NYU's Stern School and RGE Monitor, who notes there is already a 'slow-motion run on retail banks' occurring nationwide.That "run" could accelerate as people realize the FDIC fund has about $50 billion to 'insure' about $1 trillion in assets at the nation's financial institutions, says Roubini. 'They're going to run out of money' unless Congress acts soon to recapitalize the FDIC."

"Bank of America on Monday began adding another slice to its growing financial services empire, buying Merrill Lynch in a $50 billion deal that would create a bank that offers everything from fixed-income trading to credit card lending."

"As many as 45 percent of borrowers with payment-option adjustable-rate mortgages issued from 2004 to 2007 and bundled into securities may default, according to Fitch Ratings analysts Roelof Slump and Stefan Hilts. Washington Mutual held $52.9 billion of the mortgages, also called option ARMs or negative amortization loans, on its books in the second quarter, with defaults doubling to $3.2 billion from the end of 2007, according to a filing with the U.S. Securities and Exchange Commission."

"The dramatic seizure of Fannie Mae and Freddie Mac by the federal government has had no downsides for real estate -- although it could ultimately cost taxpayers billions if the companies' loan portfolios continue to bleed red ink."

"Big-city developers are beginning to pick up on developing and building earth-friendly projects. Over the years, alternative energy sources were usually reserved for those folks living in more rural areas, with the personal budgets to build solar panels and one-stand wind mills to create a personal power grid. Now, condo developers are taking it to the next level in urban development."

"Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.93 percent with an average 0.7 point for the week ending September 11, 2008, down from last week when it averaged 6.35 percent. Last year at this time, the 30-year FRM averaged 6.31 percent."

Friday, September 12, 2008

"Lower home prices and falling mortgage rates have motivated California home buyers in 2008, but thoughts that prices may fall further have slowed decision-making, a real estate industry association said Thursday."

"RealtyTrac counted 303,879 foreclosure-related filings during August, the highest since it began issuing reports in January 2005. But the 27 percent year-over-year increase in foreclosure filings was less than seen in recent months, when it has ranged between 50 percent and 65 percent."

"Homeowners lured by low introductory rates to Alt-A mortgages, which typically require little or no proof of a borrower's income, may fuel the next wave of foreclosures and further delay a recovery from the worst housing decline since the 1930s. Almost 16 percent of securitized Alt-A loans issued since January 2006 are at least 60 days late, data compiled by Bloomberg show. Defaults will accelerate next year and continue through 2011 as these loans hit their three- and five-year reset periods, according to RealtyTrac Inc., an Irvine, California-based foreclosure data provider."

"Housing prices in California have always been high. I gagged when I bought a home for $200,000 in 1976, a home that had been $100,000 in 1970. But the job creation in California has usually been excellent and jobs drive the demand for housing. More demand equals upward pressure on prices. You may find this hard to believe but a few years ago when supply was tight, sellers would get five or ten offers on a property. Reasonable? Those buyers didn’t think so."

"Downey Financial in Newport Beach may find it more costly to borrower money, following yesterday’s announcement by Standard & Poor’s that it lowered Downey’s long-term rating deeper into 'junk' status."

"Latest home-selling stats from DataQuick show for the 22 business days ended Aug. 26 that the median selling price is down to $440,000, off 31.5% vs. a year ago. The last time it was lower? November 2003."

Thursday, September 11, 2008

"Contrary to market speculation, Goldman Sachs Group Inc (NYSE:GS - News) is not pursuing an acquisition of Lehman Brothers Holdings Inc (NYSE:LEH - News), reflecting concerns that integrating two investment banks would be too disruptive, sources familiar with the situation said on Thursday."

"Rates on 30-year mortgages dropped sharply this week, falling to the lowest level in five months, as the government's dramatic takeover of mortgage giants Fannie Mae and Freddie Mac had the hoped-for impact of lowering mortgage"

"Though there’s virtually no chance the Fed will change interest rates at its meeting next Tuesday, there’s a growing likelihood it will make subtle changes in the language of its policy statement, placing greater emphasis on the risks to growth than the threat of inflation."

"Federal Reserve Vice Chairman Donald Kohn said on Thursday there was no clear evidence the plunge in U.S. house prices was coming to an end. 'The jury is still out on whether housing prices are close to finding a bottom,' Kohn said in prepared remarks for delivery at a Brookings Institution conference where he was commenting on a series of academic papers."

"WaMu, the biggest U.S. savings and loan, rose 22 percent to $2.83 at 4:15 p.m. in New York Stock Exchange composite trading. It fell as much as 25 percent earlier after tumbling 30 percent yesterday and 20 percent on Sept. 9."

"More than 600 lawsuits related to the subprime mortgage crisis were filed in U.S. federal courts since January 2007, including 310 in the first six months of this year, surpassing litigation related to the U.S. savings and loan collapse of the 1990s, according to a consulting firm report."

"U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days."

Wednesday, September 10, 2008

"Two groundbreaking studies released today conclude that new homes have already met and in fact exceeded the state’s ambitious 2020 greenhouse gas emission reductions, and that the state must also look at retrofitting existing housing in order to meet the strict emissions requirements, the California Building Industry Association announced today."

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 5, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 496.2, an increase of 9.5 percent on a seasonally adjusted basis from 453.1 one week earlier. This week’s results include an adjustment to account for the Labor Day Holiday. On an unadjusted basis, the Index decreased 13.6 percent compared with the previous week and was down 24.4 percent compared with the same Labor Day week one year earlier."

"Delinquency rates ticked up slightly in the second quarter for most commercial/multifamily mortgage investor groups, but remained at the lower end of their historical ranges, according to a new report from the Mortgage Bankers Association (MBA)."

"The U.S. government takeover of Fannie Mae and Freddie Mac on Sept. 7 may provide relief for homeowners who want to refinance mortgages and prospective buyers shopping for a loan. The U.S. average 30-year fixed rate fell today to 5.88 percent, the second day of decline, according to Bankrate Inc., a research firm in North Palm Beach, Florida. Last week, the rate was 6.26 percent, Bankrate said, almost half a percentage point higher, increasing monthly payments enough to price some potential buyers out of the market."

"The worst housing downturn since the Great Depression is a bonanza for Lender Processing Services Inc., the two-month-old spinoff that is the U.S.'s biggest processor of home-loan defaults and foreclosures. LPS has outperformed its former parent, Fidelity National Information Services Inc., which split off the Jacksonville, Florida-based company in July as foreclosures climbed to a record. The shares have also surpassed the Standard & Poor's 400 Midcap Index, and competitors including First American Corp. and LandAmerica Financial Group Inc., since they started trading."

"Access to Federal Reserve loans means Lehman Brothers Holdings Inc., which has plunged this week on concern about its capital, may have breathing room that Bear Stearns Cos. lacked before its abrupt collapse. The program instituted in the aftermath of the Bear Stearns debacle, the Primary Dealer Credit Facility, could be used for funding while officials, regulators and executives find alternative sources of cash, Fed watchers said."

"Washington Mutual Inc shares sank 30 percent to a 17-year low and the perceived risk of its debt soared on worries the largest U.S. savings and loan will not find a buyer or raise enough capital to combat soaring mortgage losses."

"Californians rave about year-round sunshine, temperate climate and easy access to surfing, snowboarding and everything in between. But when it comes to getting the most out of their homebuying dollar, they've got nothing on homeowners in the Midwest, a new study suggests. Eight out of the top 10 most expensive housing markets in the U.S. are in California, while eight Midwestern cities are among the 10 most affordable markets, according to the Coldwell Banker Home Price Comparison Index released Tuesday."

"Wells Fargo & Co., the biggest U.S. bank on the West Coast, has tightened terms for riskier home- equity loans and said the seizure of Fannie Mae and Freddie Mac should stabilize the housing market. Chief Executive Officer John Stumpf, 54, said today he's 'optimistic' conditions and investor confidence will improve because of the government's takeover of the mortgage-finance companies. Wells Fargo, the second-biggest U.S. home lender, services $1.5 trillion in mortgages."

Tuesday, September 09, 2008

"The Pending Home Sales Index,¹ a forward-looking indicator based on contracts signed in July, fell 3.2 percent to 86.5 from an upwardly revised reading of 89.4 in June, which had risen 5.8 percent from May. The July index remains 6.8 percent below July 2007 when it stood at 92.8."

"Sacramento-area homebuyers flocked to mortgage offices Monday to lock in some of the year's lowest interest rates following a weekend federal takeover of mortgage giants Freddie Mac and Fannie Mae. But inside one of the nation's hardest-hit housing markets, which has seen billions of dollars in home equity erased the past two years, it was still tough to gauge the longer impact. The early consensus among local mortgage brokers, home builders and economists was that the government takeover can't hurt and might be good for Sacramento's real estate market."

"The U.S. Treasury Department takeover of mortgage entities Fannie Mae and Freddie Mac could "short-circuit" the role of the entities during real estate downturns and lead to higher down-payment requirements and lower home-ownership rates, the California Association of Realtors cautioned in a statement Monday afternoon."

"The U.S. government's takeover of Fannie Mae and Freddie Mac drove the MSCI World Index of developed-market stocks to a 2.2 percent gain yesterday, the most since April 16. The rebound won't last because the U.S. housing crisis, which caused the first nationwide decline in home prices since the 1930s, will persist, Credit Suisse's London-based strategists led by Andrew Garthwaite wrote in a report. Also, Europe and the U.K. are 'close to recession,' they added."

"Government officials are letting Wall Street banks pull off what makers of defective cars, computers and condos can't. After the collapse of a product banks created and controlled, they're charging the customers for repairs. The customers include taxpayers from New York to California, as well as not-for-profit institutions such as hospitals and universities. They sold auction-rate bonds, whose interest rates were set in periodic bidding. Since the market for those bonds began to fall apart last year, the issuers have had to pay an extra $2 billion in interest."

"The cost of hedging against losses on Treasuries rose to a record on concern the U.S. government faces higher liabilities because of its rescue of mortgage companies Fannie Mae and Freddie Mac, credit-default swaps show."

"Yields relative to benchmarks on Fannie Mae and Freddie Mac's $4 trillion of mortgage securities fell for a fifth day after the largest drop on record yesterday. Spreads on the government-controlled companies' $1.7 trillion of corporate debt rose a day after their biggest drop."

"The Federal Trade Commission said today that Bear and its EMC Mortgage Corp. subsidiary have agreed to pay $28 million to settle a FTC lawsuit that accused them of unfair billing practices. The FTC charged that Bear and EMC misrepresented what its customers owed and collected unauthorized fees. They also allegedly violated credit-reporting rules by turning over customers’ names and payment histories to credit agencies without disclosing that some of the amounts were disputed."

"Unlike other surveys that are based on median home prices, Coldwell Banker’s ranking is based on an apples-to-apples comparison of a 2,200-square-foot, four-bedroom, 2 1/2-bath home in 315 U.S. markets, as well as Puerto Rico, Canada and a sampling of countries and territories outside of North America where Coldwell Banker has a presence"

"A huge winner from the Fannie Mae/Freddie Mac federal takeover was Bill Gross’ mortgage-heavy Pimco Total Return Fund, which rose 1.3% in price on Monday. That’s a huge jump for any bond fund, and the Newport Beach money manager believes it was likely a record gain for the mutual fund."

Monday, September 08, 2008

"I commend Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart for their bold actions to bring stability and continued liquidity to the nation’s mortgage market. Fannie Mae and Freddie Mac have always played a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. Their critical mission must not be interrupted, and Sunday’s announcement goes a long way in making sure that does not happen."

"'Although Fannie and Freddie shareholders will lose, and the move will cost US taxpayers tens of billions of dollars, the housing market will receive an important boost via lower mortgage rates and more available mortgage credit,' said Mark Zandi, chief economist at Economy.com."

"Federal Deposit Insurance Corp. Chairwoman Sheila Bair warned bankers to brace for higher insurance premiums as banks continue to fail and the the FDIC looks for ways to boost reserves to required minimums. Addressing the Florida Bankers Association Thursday, Bair said 98 percent of banks that hold 99 percent of total bank assets are 'well capitalized.' But 10 FDIC-insured banks have failed this year, and Bair warned of more failures to come."

"Lehman Brothers Holdings Inc. is trying to sell its fund-management unit to cover further mortgage- related writedowns. If it does, what's left won't be worth much, based on how investors value the firm."

"Sovereign Bancorp Inc., Gateway Financial Holdings Inc. and lenders with 'significant' stakes in Fannie Mae and Freddie Mac may be left grasping for capital after the U.S. government seized the mortgage companies and placed them into conservatorship."

"Washington Mutual Inc., the biggest U.S. savings and loan, tumbled as much as 24 percent after ousting Chief Executive Officer Kerry Killinger and disclosing that regulators stepped up scrutiny of the lender's operations. WaMu signed an accord with the Office of Thrift Supervision that calls for the Seattle-based company to reduce risks and overhaul procedures, according to a statement today. Alan Fishman, 62, of Meridian Capital Group, a New York-based commercial mortgage broker, replaces Killinger, 59, who was CEO for 18 years."

"Consumers nationwide were slightly less nervous about declining home values in August than July, but they still say they are cutting back on their spending, according to the latest Discover U.S. Spending Monitor monthly survey."

"Steve Thomas at Re/Max Real Estate Services in Aliso Viejo calculates a 'market time' benchmark tracking how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made. Reading his latest report, your blogger reflected back a year ago as the mortgage crunch was fully showing its impact on the local market. Today, after much turmoil and significant price cuts, the market appears to have stabilized. (Well, 42% of the for-sale supply are distressed homes."

"Mortgage rates in Orange County plummeted this morning as markets reacted to Sunday’s news about the government takeover of the two largest buyers of U.S. home loans. The rate on a 30-year fixed-rate mortgage up to the old conforming limit of $417,000 dropped as low as 5.5% with a one-point fee from 6% on Friday, said Al Hensling, head of United American Mortgage in Irvine."

"Home market watcher Steve Thomas at Re/Max Real Estate Services in Aliso Viejo reports that the number of O.C. distressed properties (homes listed by agents as foreclosures or short sales) was 5,744 last week, that’s down 121 vs. two weeks earlier or a -2.1% change."

Friday, September 05, 2008

"The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.41 percent of all loans outstanding at the end of the second quarter of 2008, up six basis points from the first quarter of 2008, and up 129 basis points from one year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey."

"The Mortgage Bankers Association (MBA) today submitted a comment letter to the Securities and Exchange Commission (SEC) urging the SEC to delay consideration of proposed changes to its rules and forms regarding reliance on Nationally Recognized Statistical Rating Organization (NRSRO) ratings. MBA recommends that consideration of the proposed rules be delayed until the SEC collaborates with banking and insurance regulatory agencies to develop a consistent, comprehensive, and coordinated policy regarding the reliance on NRSRO ratings in their respective regulations."

"Anderson said it was a mortgage finance bubble that got the country into this mess, and we're not out of the woods. Though there are some encouraging signs in the housing market, such as those mentioned by Schniepp, Anderson said there is a concern that if mortgage rates spike upward it could delay any real improvement in home demand. John Burns of John Burns Real Estate Consulting set the housing recovery closer to 2011. That recovery will vary depending on location; metropolitan areas closest to jobs should rebound first, he said."

"Merrill, battered by more than $40 billion of credit market writedowns, has sold mortgage-linked assets to reduce risk and free up capital. The company trades at 1.25 times book value, compared with 0.95 for Citigroup Inc., the only firm that's reported larger writedowns and losses stemming from the credit market crunch, according to data compiled by Bloomberg."

"Bank of America Corp., the nation's second-largest bank, said it wants to settle state and federal regulatory probes into how it marketed auction-rate securities on terms similar to agreements with other major banks."

"Bonds backed by credit card debt, car loans and commercial mortgages were the worst performers in the debt markets in August as concern escalated that consumers may fall further behind on their bills."

"Drawing on data from National City Corp. in Cleveland, Global Insight said San Diego single-family resale housing, which had a median price of $349,300 in the second quarter, was 17.2 percent undervalued, based on household income and prices. In the second quarter of 2005, single-family housing, then with a median price of $505,900, was 39.1 percent overvalued."

"Greenspan says Congress needs to give the government new powers to handle troubled companies to minimize any potential losses to American taxpayers. A self-described libertarian Republican, Greenspan has a reputation for being wary of giving the government extra powers. However, in crisis situations, there needs to be a clear process for handling bailouts, rather than depending on the Fed to do so, he reckons."

"Latest home-selling stats from DataQuick show for the 22 business days ended Aug. 20 shows that the median price is now at $445,000 — that’s $200,000, or 31%, below the peak of $645,000 hit in June 2007."

Thursday, September 04, 2008

"Forty percent of Realtors® report that green building is important to their business and clients, while 87 percent believe it will be of even more interest a year from now. NAR is engaged in various green building issues through initiatives like the Smart Growth Action Grants Program that helps Realtor® associations create livable communities. In addition, many state and local Realtor® associations are developing programs to teach members about energy-efficient and environmentally conscious home features."

"Price wars are being waged in north Fontana's upper middle-class neighborhoods as home builders drop prices, hoping to stave off multimilion-dollar losses. They're competing against one another, but collectively, their products are going up against bank-owned properties, foreclosures and short sales on homes that were built just two or three years ago around the corner."

"New York home foreclosures rose in August from July, signaling a potential drop in prices, but the Los Angeles and Miami markets showed a slight improvement, real estate research website PropertyShark.com said on Wednesday."

"According to a recent report from the Center for Economic and Policy Research, a Washington, D.C. think tank, the collapse of house prices that started in 2006 has wiped out more than $4 trillion in home equity, putting a sizable dent in the net worth of millions of baby boomers."

"Home price declines are already approaching those in the Great Depression, when they plunged 30%t during the 1930s. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around."

"Merrill Lynch & Co., the third- largest U.S. securities firm, discussed selling mortgages and other debt to Korea Asset Management Corp. for less than $200 million, a person familiar with the negotiations said."

"Hovnanian Enterprises Inc. said Wednesday its fiscal third-quarter loss more than doubled from a year ago as the homebuilder suffered steep declines in new home contracts and hefty markdowns on land values."

"For the fiscal third quarter ended July 31, Toll had a net loss of $29.3 million, or 18 cents a share, compared with a profit of $26.5 million, or 16 cents, a year earlier. Analysts had forecast a loss of 35 cents a share in a Bloomberg survey."

"California Department of Real Estate figures show that the number of real estate licenses in the state dropped for an eighth month in a row in July. The state had 540,735 brokers and sales associates as of July — about 8,500 fewer than when the number of licenses peaked in November. The number of real estate licenses rose precipitously throughout the housing boom, and continued to build well after sales began tumbling in 2005 and agent earnings were slashed."

"Orange County rose two slots in the national ranking of riskiest places to make a home loan, hitting No. 7 in the third quarter up from No. 9 in Q2, reports First American CoreLogic. No. 1, again, is the Inland Empire and No. 2, also again, is Los Angeles."

Wednesday, September 03, 2008

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 29, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 453.1, an increase of 7.5 percent on a seasonally adjusted basis from 421.6 one week earlier. On an unadjusted basis, the Index increased 5.8 percent compared with the previous week and was down 27.0 percent compared with the same week one year earlier."

"Spending on residential construction projects in July fell 27.5 percent from a year ago, the U.S. Census Bureau reported this week. The seasonally adjusted annual rate of private residential construction was $357.8 billion in July, compared with $493.6 billion a year earlier, and was down 2.3 percent from $366.1 billion in June '08. Spending has fallen in each of the last 17 months."

"The median price of an existing single- family home as a percentage of median disposable income rose to a record high of 469.5% in 2005, far above the median value of 337.9% during the history of this series (1968-2007) which includes the inflationary period of the later 1970s and the sharp increase in home prices seen in the first seven years of the current decade. Excluding the problematic period of the 1970s and the current decade, the median was 336.5%."

"GMAC LLC and its Residential Capital LLC home loan unit plan to dismiss 5,000 employees, or 60 percent of the unit's staff, and close all 200 GMAC Mortgage retail offices because of weak real estate markets."

"Federal Reserve Bank of Boston President Eric Rosengren said the U.S. credit crunch has blunted the impact of the fastest interest-rate cuts in two decades, signaling he opposes raising borrowing costs."

"BlackRock Inc., the biggest publicly traded U.S. asset manager, is seeking as much as $3 billion for a fund to buy loans that banks are selling for losses, said two investors with knowledge of the matter."

"Option ARMs are loans that allow borrowers to make very low minimum payments that don't even cover the interest for the loans. The difference is then added to the mortgage balance, which grows every month. There are about one million option ARMs outstanding, according to Fitch, and somewhere between 10% and 24% of these are seriously delinquent - 90 days or more past due. But payments are slated to jump for large numbers of option ARM borrowers in the next two years, which Fitch predicts will double that delinquency rate."

About Me

Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder and money partner.

Renowned for his ability to forecast long-term real estate market trends and timing, the release of TheCalifornia Comeback in 1997 gained him much notoriety and its accuracy of the extensive report led many California investors to financial freedom. His January 2006 release, The California Crash, is an in-depth look into the California market correction and the statistics behind Bruce’s predictions. His latest award winning report, Category 5, goes into great detail why Bruce isn’t ready to call California Comeback 2 and what the real estate community should expect in the coming two years as the market continues its correction.

Bruce speaks and debates throughout California and has been a guest speaker at the California Builders Industry Association, California Association of Mortgage Bankers, The Financial Executives Networking Group, the Southern California Appraisal Institute, the Apartment Owners Association, the Real Estate Research Council, numerous California Realtor associations, the local Chamber of Commerce, and several local and national investment clubs. In late summer of 2008, Bruce hosted the I Survived Real Estate 2008 fundraiser bringing together top industry segment leaders to discuss the current state of California real estate market which benefited the Susan. G. Komen for the Cure Foundation.

Bruce is host of The Norris Group Real Estate Radio Show on KTIE 590am where he interviews real estate industry leaders and economists. Guests have included Frank Nothaft with Freddie Mac, Peter Schiff of Euro Pacific Capital, Leslie Appleton-Young and Joel Singer with C.A.R., Alan Nevin with the CBIA, RealtyTrac, PIMCO, PMI Group, REDC, HUD, the National Auctioneers Association, and the Center for Responsible Lending to name a few. For a complete list of past guests, visit the website at www.TheNorrisGroup.com. The show won a Platinum Hermes Creative Award in 2009.

Bruce has contributed articles to many real estate magazines and newsletters including RealtyTrac’s Foreclosure Newsletter, The Business Press, Creative Real Estate Magazine, The Orange County Register, AOA Magazine, and the Daily Commerce. He has also been featured in The Wall Street Journal, Fox Business News, The New York Times, Good Morning America, the Los Angeles Times, Fortune,Mortgage Banker Magazine, Money Magazine, Reuters, Associated Press, The Orange County Register, The Tribune, and numerous others.